Trustees: Dispositive Powers Flashcards
Which of the following is true about the statutory power of maintenance under section 31 Trustee Act 1925?
A. It applies to capital and allows full advancement of a beneficiary’s share
B. It applies only to vested interests and never contingent ones
C. It requires income to always be paid to the life tenant regardless of trust terms
D. It allows trustees to use income for the maintenance or education of a minor
D. It allows trustees to use income for the maintenance or education of a minor
Explanation: Under section 31 Trustee Act 1925, trustees can apply trust income towards the maintenance, education, or benefit of a minor, whether their interest is vested or contingent, unless there’s someone else entitled to that income.
A minor beneficiary has a contingent interest and the trustees want to help with school fees. Can they do this?
A. No, the trustees must accumulate all income
B. Yes, using the power of advancement
C. Yes, using the power of maintenance
D. No, contingent interests are excluded from all powers
C. Yes, using the power of maintenance
Explanation: The statutory power of maintenance under section 31 allows trustees to use income for a minor’s benefit even if the interest is contingent, such as to pay for education or support.
Trustees want to use capital from a trust to give a cash lump sum to a 17-year-old with a vested interest. What power allows this?
A. The statutory power of advancement under section 32 Trustee Act 1925
B. The statutory power of maintenance under section 31 Trustee Act 1925
C. The power of investment under the Trustee Act 2000
D. The inherent jurisdiction of the court
A. The statutory power of advancement under section 32 Trustee Act 1925
Explanation: Section 32 TA 1925 allows trustees to advance capital from a beneficiary’s share, even before they are entitled to it absolutely, as long as the advancement does not exceed their presumptive share.
Which of the following is a limitation of the statutory power of advancement under section 32 TA 1925?
A. It can only be used after the beneficiary reaches 21
B. It is limited to half of the beneficiary’s presumptive share unless the trust says otherwise
C. It cannot be used if the interest is vested
D. It requires approval from all other beneficiaries
B. It is limited to half of the beneficiary’s presumptive share unless the trust says otherwise
Explanation: By default, section 32 only allows trustees to advance up to half of the beneficiary’s presumptive share unless the trust instrument expressly removes that restriction.
A trust contains an express clause allowing trustees to advance the entire capital share to a beneficiary. The trustees give 90 percent to the beneficiary early. Is this permitted?
A. No, only half can be advanced under section 32
B. Yes, if the trust allows a greater advancement than section 32
C. No, unless the beneficiary is over 21
D. No, unless all beneficiaries consent
B. Yes, if the trust allows a greater advancement than section 32
Explanation: Trustees can override the 50 percent cap in section 32 if the trust expressly gives them broader powers — for example, to advance 100 percent of a share.
If a beneficiary has a contingent interest and the trustees want to make an advancement from capital, what must they consider?
A. That the beneficiary is the only person with a potential claim
B. That the advancement benefits a sibling beneficiary equally
C. That the advancement is limited to the beneficiary’s presumptive share
D. That the advancement is covered by a Benjamin order
C. That the advancement is limited to the beneficiary’s presumptive share
Explanation: Trustees can only advance capital up to the share the beneficiary would likely receive (their presumptive share), and must consider the potential interests of others.
Which of the following best describes the nature of the statutory dispositive powers available to trustees?
A. They are only available when expressly mentioned in the trust
B. They always override contrary terms in the trust
C. They are implied unless expressly excluded by the trust instrument
D. They are discretionary and must be exercised in good faith and for proper purpose
D. They are discretionary and must be exercised in good faith and for proper purpose
Explanation: Dispositive powers like maintenance and advancement are discretionary. Trustees must use them in good faith, acting in the best interests of beneficiaries, and only within the scope of the power.
Trustees use the statutory power of maintenance to pay £3,000 toward a minor’s school fees. Later, the minor does not inherit due to a condition failing. What is the result?
A. The payment is still valid and does not need to be repaid
B. The payment must be repaid by the minor’s parents
C. The payment becomes a debt of the estate
D. The payment is void and unlawful
A. The payment is still valid and does not need to be repaid
Explanation: If trustees act properly under the power of maintenance, any payments made for the minor’s benefit are valid even if the minor’s interest later fails.
